TaxTMI 
TaxTMI 
2010 (1) TMI 881
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....e assessee company is engaged in the business of import of rough diamonds, cutting and polishing and thereafter export of the same. The Assessing Officer during the course of assessment proceedings observed that the assessee company has claimed a sum of Rs.22,69,75,283 as labour charges paid to karigars. On being asked by the Assessing Officer, the assessee filed particulars of the individual recipients. The Assessing Officer issued notice u/s. 133(6) to the following parties: (a) Shri K.K. Kasi - Rs.5,27,610/- (b) Shri Pratapbhai R. Purohit - Rs.3,20,123/- (c) Shri Vithalbhai Raghavbhai Lukhi - Rs.9,18,362/- (d) Syam Diamond - Rs.5,87,752/- (e) Shri K.K. Keshwan - Rs.3,85,344/- 4. The Assessing Officer observed that although notice u/s. 133(6) was served on Shri K.K. Kasi, no reply was received from the said person. On being confronted the assessee filed confirmation in respect of Shri K.K. Kasi. However, in absence of PAN in the confirmation in respect of the said party, the Assessing Officer doubted the creditworthiness of the party and the genuineness of the transaction. Accordingly he disallowed the labour charges of Rs.5,27,610/....
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....re. Since the parties have confirmed to have received the payments, therefore, in our opinion, merely for want of PA Nos. the Assessing Officer was not justified in disbelieving the transactions by doubting the creditworthiness of the karigars. In this view of the matter, we uphold the order of the CIT(A) and the ground raised by the Revenue is dismissed. 8. Grounds of appeal No.2 by the Revenue reads as under: "2. On the facts and in the circumstances of the case and as per law, the ld. CIT(A) erred in deleting the addition of Rs.6,99,24,518/- made by the Assessing Officer on account of undervaluation of closing stock which was determined by adopting the average manufactured cost method since the assessee has not reasonably maintained the stock to arrive at a fair valuation of the closing stock." 9. Facts of the case, in brief, are that the Assessing Officer on perusal of annexure 5 to Form No.3CD noticed that the assessee company has shown the valuation of closing stock in respect of rough diamonds at Rs.53,99,95,752 and total quantity of rough diamonds was shown at 17,14,272.23 cts. From the quantitative details of rough diamonds and polished diamonds giv....
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....g stock or stock manufactured during the year of similar/near to similar lots to arrive at the saleable lots as per the international demand in the market. In the light of above facts, the valuation arrived at of different lots are 10,450 (highest), 1400 (lowest). It shall not be out of place to mention that better quality goods are sold during the year as per the international demand and the lower end quality goods are in the stock which can be seen from the quantities available at the end of the year (refer back up value chart). In the light and circumstances of the case and highly technical aspect of the case wherein assorters who have the expertise to assort the goods into various lots, sizes, grades and weights, different lots are accordingly, reflects in the opening stock as well as in the manufactured stock and also in the closing stock and due to separate valuation applicable in our case the weighted average method is not applicable and not practical as a small lot of diamond with higher grade and quality may work out into very high valuations and a very large quantity of diamonds would work out to low valuation." 12. Based on the arguments advanced ....
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....on of the Bench to the office note in the said order and submitted that the Assessing Officer in the said order has himself mentioned that if the method of valuation is adopted for this year the same will not be beneficial to the revenue. Further the Assessing Officer had given a calculation on the basis of the average method of valuation according to which there is a loss of about Rs.20 crores to the Revenue if the same method is adopted. He accordingly submitted that the CIT(A) was justified in deleting the addition made by the Assessing Officer on account of net valuation of closing stock. 15. We have considered the rival submissions made by both the sides, perused the orders of the Assessing Officer and the CIT(A) and the Paper Book filed on behalf of the assessee. We find the assessee has enclosed the details of opening stock, purchases, sales and closing stock of diamonds both quality wise and value wise. We find the Revenue in the past has accepted such opening stock, purchases, sales and closing stock and the books were never rejected, a statement made by the learned counsel for the assessee and not controverted by the learned DR. It is the submission of the learned....
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....rrent year 44,73,29,051.00 Excess/shortfall in value of closing stock 20,00,02,255.00 16. Thus from the above it is clear that if the average cost method is adopted then in the A.Y. 2006-07 the income of the assessee will diminish by an amount of Rs.20,00,00,255. Thus according to the Assessing Officer himself this method is not to be adopted for the A.Y. 2006-07. We, therefore, find merit in the submissions of the learned counsel for the assessee that the method of valuation adopted by the Assessing Officer is without any sound basis and is uncalled for. In this view of the matter and in view of the detailed order passed by the CIT(A) on this issue, we do not find any infirmity in the order of the CIT(A) and accordingly uphold the same. This ground raised by the Revenue is accordingly dismissed. I.T.A. No.3529/Mum/2007 (A.Y. 2004-05): 17. Grounds of appeal No.1 by the Revenue reads as under: "1. On the facts and in the circumstances of the case and as per law, the Ld. CIT(A) has erred in deleting the addition made by the AO on account of disallowance of electricity expenses ignoring the findings of the AO in assessment proceedings." &nbs....
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....he assessee did not pay any other charges towards the laser machine except the electricity charges consumed on use of the laser. It was further submitted that such electricity charges were not claimed independently by Shri Dilipbhai in any of the concerns. A certificate to this effect was also filed before the CIT(A). 20.1 Based on the arguments advanced by the assessee, the CIT(A) deleted the above disallowance. While doing so he observed that the decline in labour processing charges from Rs.57.l86 lakhs to Rs.18.27 lakhs is sufficient evidence to establish that the laser treatment has been done in-house. Therefore, the disallowance of electricity charges payment on the ground that the electricity bill payment is not in the name of the assessee is not justified. He accordingly deleted the addition. Aggrieved with such order of the CIT(A), the Revenue is in appeal before us. 21. The learned DR submitted that there was no written agreement between the two parties. The auditor's statement also does not mention about this fact. The assessee has not paid any lease rent for the machine. The order deleting the addition by the CIT(A) is merely on the basis of a farfetched ....